It is in South Africa's interest to see a thriving and stable Zimbabwe. A collapse of its neighbour's economy would probably see an influx of legal and illegal migrants into South Africa – a situation that could fuel xenophobia and further strain service delivery.
Yet there has been a bewildering contrast between South Africa's messages of solidarity and its inaction where it matters. On the one hand, President Cyril Ramaphosa's government has maintained its support for President Emmerson Mnangagwa's administration. South Africa was the first to congratulate him on his electoral victory in August 2018. This has been followed by spirited calls for the unconditional lifting of sanctions and restrictive measures placed on Zimbabwe nearly two decades ago.
On the other hand, South Africa has come short of providing what Mnangagwa urgently needs: a financial bailout. The just-ended Zimbabwe-South Africa Bi-National Commission session – the third since the inaugural session in 2016 – might have put paid to the many rumours that South Africa would provide Zimbabwe with a much-needed cash injection. Instead, it ended with a joint communiqué that reads more like a political statement of solidarity with little in terms of relief for its cash-strapped neighbour.
Established during the tenure of former presidents Robert Mugabe and Jacob Zuma, the commission has been little more than an annual symbolic gesture of friendship between the two. Ramaphosa's team sent ahead of the Bi-National Commission engaged in robust meetings with key players in the private and public sectors presumably to try to establish how South Africa could help its beleaguered neighbour.
While the decision to not bail Zimbabwe out is probably based on practical economic calculations, the anti-sanctions rhetoric is a different matter. A cursory view of the anti-sanctions call might lead one to the conclusion that lifting sanctions would grant Zimbabwe access to lines of credit from the international market and thereby ameliorate its currency crisis.
However, considerations for South Africa are as much political as they are economic. Sanctions imposed on Zimbabwe by Western countries relate to the blatant human rights abuses of the Mugabe regime. South Africa's anti-sanctions position could also be interpreted as a general stance – shared by the wider Southern African Development Corporation (SADC) region – against sanctions in general.
The ‘sanctions must fall' mantra should be seen as a distraction from the economic mismanagement of the past three decades. Even Mnangagwa has said the ZANU-PF government shouldn't use sanctions as an excuse for the country's economic woes.
So why has South Africa taken up the ‘sanctions must fall' mantra while staying silent on the human rights abuses, killing of protesters and a heavy-handed clampdown on civic space during the January fuel hike protests?
South Africa is wary of being perceived as aligning with the West, especially the United States (US). The US government has been vocal and forthright against the Mnangagwa regime's use of force against protesters to the extent of renewing sanctions for another year.
Offering the Zimbabwe government unqualified support becomes an opportunity for South Africa to demonstrate its international foreign policy independence and to shore up against "invasive" Western neo-colonial tendencies.
At the same time, well aware of the depth of Zimbabwe's economic and currency crises, South Africa knows that giving bilateral aid of $1.2-billion wouldn't necessarily stabilise its neighbour's economy. Without addressing the enduring currency crisis, any bailout would be sucked into an economic black hole just to have Zimbabwe requiring more. The shortage of hard currency only begets more shortages.
The Zimbabwean government needs foreign currency for consumer goods, including for the procurement of fuel and wheat, as well as to service debt, which the finance minister estimates to be around $16bn.
The recently introduced interbank foreign currency trading system has so far not been able to address the foreign currency shortage. The real-time gross settlement (RTGS) dollar continues a steady depreciation against the US dollar from the 1:2.5 at its introduction to 1:3 in six weeks.
Worse, the floating of the RTGS dollar has not engendered confidence in the monetary system. On the black market, the RTGS dollar continues to plummet weekly and inflation is on the rise. Prices of basic commodities such as bread have risen steeply. There is still no guarantee against arbitrage and policy somersaulting from the cornered government.
Further, a bailout would put South Africa in an invidious position. South Africa is itself in the throes of economic stagnation emerging from sluggish growth of 0.8% in 2018. The country's unemployment rate is currently hovering above 25% – one of the highest in the world.
The recent worsening of power cuts only plays into an already volatile domestic situation. Any talk of bailing Zimbabwe out would probably elicit a backlash from the restive population already prone to xenophobic tendencies towards citizens from neighbouring states. The African National Congress can ill afford to antagonise citizens any more in an election year.
Strong parallels can be drawn with the situation in South America where South Africa has been supporting Nicolás Maduro Moros's government in Venezuela against the machinations of the US's Donald Trump administration.
While the matter forming the basis of the Zimbabwe crisis is different from Venezuela, the geopolitical script plays out in the same way. South Africa is choosing the course of solidarity with the "besieged".
As Zimbabwe's economic and political situation continues to teeter on the verge of chaos its southern neighbour seems to be taking a considered approach to the crisis. The dilemma for SA is that without a cash infusion, the economic crisis will worsen, and a worsening economic situation will probably result in more protest and civil unrest. The Mnangagwa administration has already shown itself only too eager to approach protest with force and brutality.
This pushes South Africa further into an unenviable choice between principle, as enshrined in its Constitution, and the realities of geopolitics. It remains to be seen for how long South Africa will give Zimbabwe a palliative response before the wheels come off.
Ringisai Chikohomero is a researcher, Peace Operations and Peace Building Programme, Pretoria
Political figures in South African have condemned the latest attacks on foreigners in Durban. At the same time, their anti-migrant rhetoric ahead of elections on May 8 is fueling the country's simmering xenophobia.
Loveness James was chased from her home in Burnwood, an informal settlement in Durban, in the middle of the night early last week.
"It was a normal day. I went to work at the salon, came home, cooked for my husband and went to bed," the 22-year old Malawian national, who is nine months pregnant, told South Africa's Independent Online.
Then a violent mob broke down the door of her house.
"They started shouting and telling us to leave, they kept chanting that we must leave their country, they hit and kicked my husband. All I could think of was my unborn baby, my water breaking and me giving birth in front of people who wanted us dead," she said.
Others migrants have similar stories after groups started attacking, looting and burning homes, shops and cars owned by foreigners in Durban a week ago. Three people died in the violence, and dozens were injured, like the man in the picture above.
"It was about 1 a.m. on Monday when we were forced out of our rented rooms," Miriam Mussa, a Malawian immigrant, told GroundUp, a South African public interest news agency.
"I was with my baby and my husband. Even though they did not hurt us after seeing that we had a small baby, they allowed us to leave with only the clothes we were wearing. We watched them as they took out all our furniture," Mussa said.
A hand pulls down the back of a man's T-shirt to reveal a long scar
This man was injured in the xenophobic attacks in Durban
Mussa and her family, along with some 60 other migrants, ended up fleeing to a local police station, camping for several days in the open in its grounds. Dozens of others foreigners took refuge in a nearby mosque.
The xenophobic attacks have created a sense of fear and betrayal among the immigrant community, says Hupenyu Makusha, from Refugee Pastoral Care. The Durban-based organization has been providing blankets, tents and clothing to those forced out of their homes.
"These people [the victims] were actually neighbors to the locals, who turned against them. So they feel very betrayed by their neighbors … very insecure," he told DW in a phone interview from Durban.
Ongoing cycle of xenophobic violence
Attacks against foreigners and foreign-run businesses have erupted regularlyin the past decades in South Africa.
Against a background of chronic unemployment for black South Africans, immigrants are often seen as stealing valuable jobs and taking advantage of housing and health services squeezed by mismanagement and corruption. Migrants are also often accused of being involved in crime.
The facts simply don't support this, says Loren Landau, the director of the Johannesburg-based Africa Center for Migration and Society.
For example, although exact data is difficult to come by, it's estimated some 1.5 to 2 million migrants live in South Africa, a country with a population of 58 million. But a far larger number – around 9 million – of locals are unemployed.
"Even if you you took [the migrants] out, you wouldn't see that many more jobs," said Landau.
"But it's not facts that are driving the violence. It's the way in which it's being framed by national and local leaders," Landau told DW in a telephone interview.
Parties take a hard line on migration ahead of elections
On May 8, the ruling African National Congress (ANC) is facing what is probably the party's most competitive national elections since the end of apartheid in 1994.
The main opposition party, the Democratic Alliance, already said in September 2018 that immigration would be one of its key campaign issues, arguing that borders needed to be more tightly controlled.
Recently, the ANC has also seized on the issue.
Speaking at an ANC rally earlier in March, President Cyril Ramaphosa promised a crackdown on undocumented migrants.
"Everyone just arrives in our townships and rural areas and sets up businesses without licenses and permits. We are going to bring this to an end. And those who are operating illegally, wherever they come from, must now know," Ramaphosa said before a cheering crowd.
ANC secretary-general Ace Magashule also warned in March about foreigners perpetrating crimes.
"If they are undocumented when crime happens, you can't even get these people. You can't get their fingerprints. [This is about] the safety of the country. It is not being opportunistic," Magashule told City Press, a South African news outlet.
Cyril Ramaphosa and his ANC party are facing tough general elections
Migrants 'scapegoats' for government failures
These kinds of statements imply that immigration and lapsed border control are somehow responsible for South Africa's considerable social problems rather than the government's failure to tackle crime, lack of services, poverty and corruption, says Landau.
The ANC has "started to look for scapegoats, look for excuses – and migrants are a convenient excuse," he said.
The strongest words against the xenophobic attacks in Durban came from Julius Malema, the leader of the Economic Freedom Fighters (EFF), while addressing a party rally on Saturday.
"We don't want votes from people who are xenophobic," he said. "We must love one another as Africans because showing love to someone from Mozambique, Guinea, Egypt and Nigeria is self-love."
At the same time, Malema regularly makes inflammatory comments about 'Boers' (white Afrikaans-speaking farmers), Jews and southeast Asians and is often accused of inciting racial divisions in South Africa.
President Cyril Ramaphosa said he "condemned violence against foreign nationals in South Africa" in a statement issued by his office on Monday – more than a week after the first attacks broke out.
Ramaphosa also called on police to identify those responsible and bring them to justice.
When it comes to persecuting xenophobic crimes, however, the state has a poor track record.
According to Human Rights Watch, "virtually no one has been convicted for past outbreaks of xenophobic violence, including the Durban violence of April 2015 that displaced thousands of foreign nationals."
Hundreds of foreign nationals attended a meeting organized by the local government after the attacks
'Hesitant' condemnation of attacks
In Durban, more than 70 Malawians caught up in last week's xenophobic attacks are looking to return to their country, according to Hupenyu Makusha, because they are too scared to stay.
As for the political response to the violence, while Makusha praised the local government for working "tirelessly" to calm the situation, he said it's been "too hesitant" at national level.
"To me, this seems to signal a point where, if the leadership, especially the president and members of the ruling party, are not saying anything … then it is maybe interpreted in different ways.
"One may say that it means approval," he said.
Zimbabwean and South African officials will meet next week, as preparations for the visit by South Africa's President Cyril Ramaphosa to his northern neighbours gather momentum.
President Ramaphosa will visit Zimbabwe on March 12 for the Third session of the two countries' Bi-National Commission (BNC), and Zimbabwe's Ambassador to South Africa Mr David Hamadziripi said yesterday that preparations for the visit were underway in both Harare and Pretoria.
The two countries held their last BNC in October 2017 and the visit by President Ramaphosa will give a lift to the already existing strong bilateral relations.
"We are going to have meetings with relevant South African officials next week to prepare for the BNC," he said.
"It is important to note that the BNC, which last met in Pretoria in October 2017, will review co-operation across the board.
"We expect issues around trade and investment, energy, transport, health, security and defence among others to be the major talking points."
He said one of the major issues expected to dominate the discussions was the establishment of a One Stop Border Post (OSBP) at Beitbridge. Under the concept travellers will be cleared once for passage into either country as opposed to the present situation where travellers have to queue twice at either side of the border to complete the same processes, which slows down the movement of cargo and human traffic.
Zimbabwe and South Africa enjoy cordial relations dating back to the days of their struggle for liberation. There is also likely to be a strong geopolitical flair as South Africa, the most influential neighbour and Africa's strongest economy, will likely throw weight behind Zimbabwe on the back of external pressures against the country, notably regarding illegal sanctions imposed on the country by the West.
Last week, the 28-member European Union bloc reviewed its restrictive measures on Zimbabwe, which was but a small token amid opposition to the embargo from progressive forces.
South Africa's Minister of International Relations and Cooperation Lindiwe Sisulu this week revealed that South Africa remained ready to help Zimbabwe, underscoring that the regional giant had a strong interest in having Zimbabwe as a peaceful and prosperous neighbour. She said of sanctions against Zimbabwe was central to this and that sanctions would feature in the discussions between Presidents Mnangagwa and Ramaphosa. President Ramaphosa has been a strident anti-Zimbabwe sanctions campaigner himself.
Last month, he took the campaign to the 49th edition of the World Economic Forum (WEF) in Davos, Switzerland, where he publicly called for the lifting of the embargo. Last year, he also called on the European Union (EU) to lift sanctions on Zimbabwe during the 7th South Africa-European Union Summit in Brussels, Belgium, where they discussed a number of issues around trade, climate change, women's rights among other global issues.
The EU and the United States of America maintain sanctions on Zimbabwe, with the EU having progressively loosened the measures. The US remains adamant, tying the punishment of Zimbabwe and Zanu-PF to give an advantage to the opposition MDC-Alliance.
Policy debates in SA’s energy sector are becoming increasingly polarised, but it is critical to ensure broad participation if we want to re-imagine the energy sector and solve SA’s energy crisis, argued experts at a recent discussion hosted by the UCT GSB in conjunction with Power Futures South Africa.
Breaking up Eskom’s vertically integrated model will help turnaround the ailing power utility and create more efficiencies in the energy sector.
This is according to panellists at a public discussion recently on the Eskom crisis which was hosted by the University of Cape Town’s Graduate School of Business (UCT GSB) in conjunction with Power Futures South Africa - a platform for inclusive, evidence-based discourse for a just and transformed South African energy sector.
Eskom, which supplies 95% of SA’s electricity, is in a severe financial crisis and is struggling to pay the interest on its massive R419bn debt out of the revenue it generates. The power utility is regarded as the single biggest risk to the SA economy by the Treasury and credit ratings agencies.
This week President Cyril Ramaphosa told delegates at the World Economic Forum in Davos that the Eskom crisis would soon be resolved.
“We are currently developing a response to the financial and operational crisis at the country’s electricity utility, Eskom. In the next few weeks, we will be announcing a set of measures to stabilise and improve the company’s financial position and to ensure uninterrupted energy supply,” the president said. In a bid to turnaround Eskom, the governing party the ANC is considering the restructuring of the utility, including separating it into three parts focussing on generation, transmission and distribution.
Speaking at the UCT GSB public discussion, Mandy Rambharos, the Climate Change and Sustainable Development Manager at Eskom, said she personally supported the breaking of the power utility.
“It will increase efficiencies. You will have an independent systems operator who treats all generators the same,” said Rambharos. However, she said there were concerns around municipalities and whether they can manage distribution networks. Eskom is owed just more than R13bn by municipalities, with the top 10 nonpayers owing R10bn. In turn, municipalities are owed R139bn by residents for services. Some residents have attributed their failure to pay for electricity to high levels of unemployment and poverty.
Nhlanhla Ngidi the head of electricity and energy at the South African Local Government Association (Salga) said the drive to turnaround Eskom will affect a lot of municipalities.
“We need collaborative leadership. You can [try turnaround Eskom] all you want, but if people do not have jobs, you will not crack it. You will have an electricity industry that is not sustainable. We have to look at design of municipalities as well. They [some municipalities] are failing by design. some of them are built on mines, and when there are no more mines, people do not have jobs,” said Ngidi.
He agreed that breaking up Eskom could turnaround the utility, but more needed to be done to create competition in the energy sector.
Professor Anton Eberhard, the director of the GSB Managing Infrastructure Investment Reform and Regulation In Africa (MIRA) programme has pointed out that breaking up Eskom may seem like a radical restructuring proposal, however it is not.
“It was proposed in the Energy Policy White Paper in 1998. And it’s logical. It separates the potentially competitive elements of the electricity industry — power generation — from the natural monopoly component, transmission. It’s also potentially efficient as it creates focused utilities,” states Eberhard.
This would help to remove impediments to investment – especially in renewable technologies – and facilitate much-needed economic growth while helping secure a sustainable energy future for SA.
Further ideas to address Eskom’s financial crisis and facilitate SA’s energy transition that were mooted at the same event, included a suggestion from Louise Scholtz, the Manager of Energy and Urban Futures in the Policy and Futures Unit at World Wildlife Fund South Africa that non performing municipalities must lose their ability to distribute and sell electricity.
“Eskom should take back that capacity until they [the municipalities] prove that they can have fiscal responsibility and have the ability to manage their own distribution systems,” said Scholtz.
Steve Nicholls, the head of Environmental Sustainability for the National Business Initiative (NBI), said all of society needs to play a role in determining SA’s energy transition.
“We as society have to engage with government and say this is what we think strategy should be, which sectors will emerge and how do we retrain people.”
Catrina Godinho, one of the founders of Power Futures South Africa said the policy debates in the electricity sector have become increasingly exclusive and polarised.
“This at a time when the world is changing around and with technological developments and environmental issues. We need to re-imagine our energy systems,” said Godinho.
Lauren Hermanus, a sustainable development practitioner and the co-founder of Power Futures South Africa said SA’s electricity crisis requires broad participation, not just by academics, politicians, and engineers.
“There is really an urgent need to access accurate information [to drive] the transition of the energy sector,” said Hermanus.
Regular media as well as social media in South Africa have much to say about the governing African National Congress (ANC). But much of the commentary fails to understand the party – or the country.
This was evident when the ANC launched its election manifesto at a January rally in Durban. Two reactions to the event mirror constant themes in the ANC commentary. Both miss important realities.
The first is related to former president Jacob Zuma’s role at the ANC manifesto launch. The second is the manifesto’s position on the South African Reserve Bank.
Much was made of the fact that Zuma was an honoured guest and reportedly received the loudest cheers. For some, this showed that the ANC has not distanced itself from Zuma and patronage politics. For others, it meant that he and patronage politics were making a comeback. Neither fear is valid.
What the current president, Cyril Ramaphosa, really thinks of Zuma is revealed by his speech to ANC activists a few days before the launch. He said:
In the past nine years, we started losing our way, corruption started settling in, we started weakening our institutions, or government processes started weakening. But fortunately, before we could go over the precipice, we realised that we have to wake up and pull the country back.
Ramaphosa did not mention Zuma by name – he didn’t have to. His audience knew that “nine years” was the period Zuma spent in office.
The speech was an unprecedented public criticism of Zuma’s record: ANC presidents do not denounce their predecessors in public. It signalled clearly that Zuma is not respected by the ANC leadership and is not about to regain his influence.
So why did the Ramaphosa-led ANC invite Zuma, say flattering things about him and promise to assign him tasks? Because the ANC remains divided.
Symptoms of division
One symptom of division is a loud pro-Zuma faction in KwaZulu Natal province, which is happy to disrupt meetings to show support for Zuma. A decade ago it loudly heckled former president Thabo Mbeki at the reburial ceremony of ANC stalwart Moses Mabhida.
Since a repeat would be embarrassing, the threat was defused by including Zuma in the event and downplaying differences between him and Ramaphosa. The “special tasks” are likely to consist mainly of joining a council of elders with no power. The intention was to defuse Zuma’s role, not enhance it.
The reaction to Zuma’s presence at the ANC launch was consistent with a pattern since Ramaphosa was elected. Commentators and citizens on social media repeatedly complain that Zuma supporters occupy posts in the cabinet.
This ignores two realities. First, in an ANC whose leadership is divided between supporters of Ramaphosa and Zuma, excluding the latter from the cabinet would mean political suicide. Second, as it did at the manifesto rally, Ramaphosa’s faction is aware of the fact that it has to accommodate its opponents.
The Zuma supporters do not occupy important Cabinet posts and have been unable to prevent the government from pursuing its anti-corruption programme.
Accurate analysis would recognise what the ANC is, not what commentators would like it to be.
Misreading the central bank clause
The second example is reaction to a clause in the ANC manifesto which says it favours more flexible monetary policy. This, it says, should be implemented “without sacrificing price stability”, but should
This was interpreted to mean that the ANC would tell the central bank to make cheap money available – and that the bank would be forced to do what politicians tell it to do.
In reality, the clause meant exactly the opposite.
A key consequence of the ANC’s divisions is pressure from the Zuma faction for more radical economic policy: its aim is to get hold of resources, not to fight poverty. But it knows that this in an effective stick with which to beat Ramaphosa’s faction.
Poverty and inequality, which are still largely racial, continue. So Ramaphosa’s faction cannot dismiss demands for radical change; they would be accused, credibly, of turning a blind eye to minority privilege. So they do accept demands for change – and try to manage them in a way that ensures they do not damage the markets or business confidence.
The central bank is a prime example. Ramaphosa’s faction is being pressed to end private shareholding of the bank. This would not affect the decisions it takes. But it would be seen as hostile to the markets.
There is also pressure to change the bank’s very narrow mandate, which instructs it to “protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic.” A number of central banks are explicitly enjoined to take jobs and growth into account.
The manifesto aims to deflect both pressures. It says nothing about buying out the shareholders or changing the mandate. It simply repeats the government position on the bank which was spelled out nearly a decade ago by the then Finance minister, Pravin Gordhan, in a letter to then governor of the bank, Gill Marcus.
The Ramaphosa faction’s move to protect the bank’s independence has been seen as an attempt to end it.
This, too, is no isolated incident.
Fallacy of a pro-business agenda
Since Ramaphosa took over, mainstream economic commentators have assumed that he was elected to do what conservatives in the marketplace want. Any sign that the government is not pursuing a strongly pro-business agenda is assumed to mean that it is a prisoner of communists. This ignores the reality in the country as well as in the ANC.
As long as poverty and inequality persist, and poor people are almost all black, no party leader who wants to win a national election can afford to ignore most voters’ needs. Governments cannot conform to the very narrow view of their role in supporting the economy.
The real question – whether plans to tackle poverty are likely to work – is ignored in the attempt to turn the ANC into a right-of-centre party and to wish away poverty in South Africa.
In both cases, we need analyses based on concrete reality – not wishful thinking.
South African prosecutors said Wednesday they would withdraw graft charges against some allies of former president Jacob Zuma due to lack of cooperation from Indian officials.
The national prosecuting authority (NPA) had alleged that $20 million (17.2 euros) of public money meant for poor dairy farmers in Free State province was syphoned off to the wealthy Gupta family, originally from India, and their associates.
The eight accused included a nephew of the three Gupta brothers, who are at the centre of allegations that Zuma oversaw a web of corruption while in power, with the Guptas awarded fraudulent government contracts. The other accused were former Gupta employees, the dairy director and three government officials. The three brothers were not charged.
"The investigators were working with Indian officials to gather information... the process has been slow, so information is not forthcoming as quickly as we had hoped," NPA spokesman Phaladi Shuping said.
The Gupta brothers left South Africa last year before police conducted a raid in their suburban home in Johannesburg. Prosecuting authorities, who were given until 30 November to formally charge the suspects, said they could re-instate the charges in future.
"We've taken the decision to withdraw provisionally," Shuping said. Earlier this year, the high court in Bloemfontein ruled that it was not satisfied that there was evidence connecting Gupta assets to the alleged scam.
"This is a reflection on the weakness of the prosecution authority," political analyst Daniel Silke told AFP.
"It does present a problem for President Cyril Ramaphosa in that opposition parties will clearly use this to accuse him of just paying lip service to the issue of fighting corruption. "But I don't think those allegedly involved can really rest peacefully yet."
Zuma was forced to step down in February as criticism grew from within the ruling ANC party over multiple corruption scandals. The opposition Democratic Alliance party said the reasons for dropping the charges were "flimsy at best, and wholly unconvincing".
South African President Cyril Ramaphosa will pay back 500,000 rand (RM149,510) donated to his campaign fund by a firm with links to his son after admitting he misled parliament, an official said.
Ramaphosa has staked his reputation on fighting corruption after his predecessor Jacob Zuma was mired in graft scandals that finally led to his ousting earlier this year. Ramaphosa had told parliament that the payment in October 2017 was to his son Andile for consultancy work for Bosasa, a company that has contracts with government institutions.
But Ramaphosa later admitted it was a donation towards his own campaign last year to become leader of the ruling ANC party, a hard-fought battle in which he beat Zuma’s chosen candidate.
“The donation was made without his knowledge,” ANC official Zizi Kodwa told the SABC state broadcaster yesterday.
“He has decided voluntarily that he will pay back the said amount and he will call for further investigation on all donations that were made to the campaign.”
The main opposition Democratic Alliance party said Bosasa had won lucrative government contracts, adding “this looks suspiciously like all other ANC government corruption deals.”
A judicial inquiry is probing allegations that Zuma and some of his family members oversaw a web of corrupt government contracts.
The ANC and Democratic Alliance will face off in elections next May. — AFP
South Africa’s new Finance Minister Tito Mboweni said on Thursday that struggling state-run South African Airways (SAA) should be closed down, adding that decisions over the future of the state carrier were not under his remit.
SAA, which has not generated a profit since 2011, survives on state guarantees and is regularly cited by credit ratings agencies as a drain on the government purse.
“It’s loss-making, we are unlikely to sort out the situation, so my view would be close it down,” Mboweni told an investor conference in New York televised live on South African public broadcaster SABC.
“Why I say close it down is because it’s unlikely that you are going to find any private sector equity partner who will come join this asset,” Mboweni added.
In August, President Cyril Ramaphosa transferred oversight of SAA to the public enterprises ministry which is led by Pravin Gordhan from the finance ministry. Ramaphosa has pledged to revive struggling state firms, including SAA.
SAA CEO Vuyani Jarana has said he is mapping out a punishing austerity plan to turn the flag carrier around. He has said layoffs and other cuts were unavoidable.
In a dramatic fall from grace over the past decade, SAA has lost its place as Africa’s biggest airline and a symbol of patriotic pride to become a source of frustration for taxpayers who have forked out more than 30 billion rand ($2 billion) since 2012 to keep it in the air.
To some observers, South Africa’s recent investment summit led by the president Cyril Ramaphosa, seemed like much ado about nothing. Several of the projects announced had been incorporated into companies’ plans for some time. And, combined with the fact that the summit had a showbiz style about it, it’s tempting to see the event as little more than smoke and mirrors.
But the summit could be more than the sum of its parts. It could be an important step forward to reviving economic growth in South Africa.
One notable outcome was that, in one crucial respect, Ramaphosa nailed his colours firmly to the mast. After the confused and confusing sophistry of the era under Jacob Zuma’s presidency, Ramaphosa committed his government to a market economy, where obstacles to private investment would be removed, where possible.
This moment is reminiscent of 1980 in India. That year, Indira Gandhi committed the Indian Congress Party to business-friendly policies. Reforms were slow, picking up a little under Rajiv Gandhi a few years later. And the major structural economic reforms only took place in 1991 under India’s new Prime Minister P. V. Narasimha Rao and the new Finance Minister Manmohan Singh.
Yet, India’s growth spurt clearly began after Indira Gandhi’s signalling and Rajiv’s initial tinkering. It didn’t wait for Rao and Singh’s dramatic reforms a decade later.
This is consistent with contemporary analysis of economic growth. Recent thinking by renowned Harvard-based economist Ricardo Hausmann and colleagues suggests that what stimulates significant growth acceleration is often not major structural changes – it can be significant incremental shifts.
The economists found that major structural reforms seldom preceded significant growth accelerations. As his colleague Dani Rodrik put it recently:
in economies that suffer from multiple distortions, small changes can make big differences.
The small change made in India was a clear shift by the dominant political party towards business-friendly policies.
Could the same be true for South Africa? Has South Africa reached it’s own Indira Gandhi moment?
Signals at the summit
Amid a great deal of fanfare, an audience of 1300 business and government leaders, and one of the globe’s most successful entrepreneurs Chinese internet commerce magnate Jack Ma, Ramaphosa announced R209 billion worth of investment at the summit.
It was important for the president to meet expectations by announcing concrete outcomes. But what was possibly more important was that he used the opportunity to send out a number of signals.
To please his own constituencies in the African National Congress (ANC) and the unions, he referred to the end of the “investment strike”; some critics of business had said they were holding back their investments as a deliberate policy.
More significantly, most of his messaging was aimed at reassuring the business community. He talked about how their investments and property were safe and how their factories were protected from expropriation by an independent judiciary and the rule of law.
Land reform would continue, he said. But it would be “fair and equitable”. Transformation would continue:
while providing certainty to those who own land, those who need land, and to those who are considering investing in the economy.
Perhaps the most telling signal was the apparently off-the-cuff remark he made dismissing the concept of “white monopoly capital”. At the dinner which followed the conference he said:
We have become accustomed to … treating our entrepreneurs and business-people (badly) and called them all sorts of names. We’ve treated them like enemies and… (called them) white monopoly capital – that must end today.
The term “white monopoly capital” is an accurate approximation of the distribution of economic power under apartheid, and much of the imbalance in economic power remains. In the Zuma era, the term was popularised by the now defunct public relations firm Bell Pottinger under contract to the Gupta family and was used by some as a cover for looting government and its agencies.
Ramaphosa, who became a successful capitalist after he left Parliament in the mid-1990s, has now signalled that he wants to build trust between government and white owned businesses. This won’t be easy. There are still elements in the ANC that reject capitalism while others want to continue using the term “white monopoly capitalism” as a battering ram.
South Africa’s disadvantage is that the country’s credibility has been damaged. After 15 years of transparent social democratic policies – from 1994 to 2009 – the country lurched into confusion under Zuma’s presidency. The ANC government became opaque, volatile and unpredictable.
The consequence was a loss of credibility in the Zuma era. Ramaphosa’s biggest challenge therefore is to recover credibility.
Ramaphosa and his advisors will be asking what can we do to rebuild credibility fast?
The answer seems simple: those involved in state capture must go, looters must be punished, and constructive policies must be carefully prepared and implemented with authority and urgency. These include fixing the state owned enterprises as Finance Minister Tito Mboweni repeatedly pointed out in his recent budget speech , better regulation for the network industries (energy, telecommunications, water) and sorting out public transport systems. In addition, honest leaders need to be appointed to the criminal justice institutions.
These all have been promised since Ramaphosa’s first State of the Nation Address in February.
The trickier, and implicit question that investment decision-makers will be asking is, is Ramaphosa’s sway over government as strong as that of Indira Gandhi’s in India in 1980? Or is the president yet to demonstrate complete control over the ANC?
The answer, unfortunately, is probably that an election has to be reasonably convincingly won before he can win the credibility he so badly needs.